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Since the Plan provides no further explanation of the meaning of "returns to employment with the Employer," it is the Plan Administrator's responsibility to interpret the meaning of the phrase as applied to these facts. The PA should document its reasons for interpreting the Plan document one way or the other and then apply this provision consistently going forward. That said, I agree with the other comments here that the participant will not have returned to employment until they show up for work. Until that day, the participant and the employer both presumably have the power to change their mind (at-will employment). In addition, and I base this on my recollection of the ERISA Committee report, pension payments are meant to be a replacement for wage payments. Therefore, until the day the participant is returned to the payroll, it is justifiable to make pension payment since it will be paid for its intended purpose.

Best "guess" as to what occurred: Many plans do not allow terminated (non-employee) participants to take partial distributions. Only Lump Sum distributions of the entire account are allowed. This makes sense, as the Plan Sponsor does not want to spend extra time/money on non-employee participants. Partial distributions were probably incorrectly allowed. Someone caught it and now you are being denied a partial distribution. They should be able to send you the plan document (not SPD) page showing this. The plan document rules in this situation, not the SPD. If this is the case, then your best bet is to roll it to an IRA and take partial distributions from the IRA.

There's no NJ income tax exclusion for deferrals into a 403(b). However, you will recover your basis for NJ Income tax purposes when you take distributions, assuming you're still a resident of NJ. See the top of page 9 of the link: https://www.state.nj.us/treasury/taxation/pdf/pubs/tgi-ee/git1.pdf

What about an administrative policy that accounts less than $____ will be forfeited for fees...

or don't pay it and let the participant know what it feels like when he has to pay a $.15 excise tax!

With a $5 balance why not just cash him out and be done?

FWIW....I agree with Luke. He resumes employment on the day he starts work.

That is not what RatherBeGolfing stated. The rollover from the plan to your IRA is not taxable. RatherBeGolfing should address the loss of the QDRO exemption from the 10% penalty by rolling over to the IRA. That is why you want to stay in the plan and take distributions as you like. That game appears to be over. The plan’s forms of distribution probably do not include “whenever you want” and it is not required to disclose the forms of distribution it does not have.

A roll over to an IRA would not be a taxable transaction and not subject to a 10% excise tax.

I think I would side with your original position on this one, Kansas401(k). This is not a situation where a participant who wants access to funds has a planned fire/rehire. It sounds like he or she had a real separation, entitling him or her to distributions. The plan document stops those distributions once he or she "returns to employment." The employee got a job offer to go back to work 3 weeks hence, and accepted. That does not mean he or she has "returned to employment." Just means he or she is very likely to return to employment in 3 weeks, but a lot can happen in 3 weeks.

Depends If in fact they did make a mistake in the past they are not required to keep making that mistake. It is also possible the plan was changed to no longer allow these kinds of payments but that should have generated a notice so that seems unlikely. The fact the Summary Plan Description (SPD) is silent doesn't bode well for you. In plans the basic rule is the right to take money out has to be described. So most of the time silence means you can't do it. If you took it all out and put it in an IRA you would have this kind of control If you really wish to push the idea you should go to the part of the SPD that spells out how you make a claim. That should spell out how to make a written claim. The plan would be obligated to either make the payment or make a written explanation why they are denying the payment. These procedures are most often found towards the end of the SP.D.

It is very possible that what they are telling you is true, but they should still be able to explain it to you. The SPD will not necessarily spell out rules for partial withdrawals if the plan does not allow it, it is more common that it will spell out what you CAN do rather than what you cannot do. So in their example, the SPD might not refer to partial withdrawals simply because the plan does not allow them. I understand what they are saying but it sounds like they need to explain it better to you rather than telling you "tough luck". Is there a reason you have chosen to keep the assets in the 401(k) plan rather than roll them to an IRA? You would have full control in the IRA.